A new report from Marcus & Millichap shows vacancy was stable during the first quarter, increasing only a tenth of a percentage point to 4.2%, while asking rents increased about three-quarters of a percentage point to $1,226 per month. At the same time, however apartment sales prices climbed 8.75% in the first three months of the year, to a median price of $102,500 per unit. Over the past 12 months, prices for Orange County apartments have jumped 17.45%.

According to John Przybyla, regional manager in Marcus & Millichap's Newport Beach office, vacancies in the class A luxury apartment segment have pushed up the overall vacancy rate for the market, with class B and C properties staying fuller. Przybyla says the luxury sector has felt "the brunt of the economic malaise." In addition, he says, a higher proportion of renters in the luxury market have been able to take advantage of low interest rates to buy homes and move out of the renter pool.

Nonetheless, Przybyla says, rising home prices in the region are still pricing many would-be first-time homebuyers out of the market, helping to keep apartment vacancy rates below 5%. For example, home prices in Orange County have ballooned more than 20% over the past 12 months. Marcus & Millichap forecasts that an improving economy and a rebound in job growth will keep vacancies tight, resulting in rent growth in the range of 3% to 5% this year if the economy rebounds as hoped.

Despite the slight bumps the Orange County market has encountered, it and the rest of the Southern California market remain "a hotbed of investment activity," according to the Marcus & Millichap report, which says the region's continuing population and employment growth and shortage of affordable housing remain driving forces in the market, along with development constraints and skyrocketing single-family home prices that prevent many renters from becoming homeowners.